Don’t Make Me Gag: Confidentiality of Settlements When The Other Side Blabs

The Herman Cain sexual harassment case brought up an issue that has concerned me for years: one-sided confidentiality agreements. As you may recall before your holiday eggnog distracted you, Mr. Cain settled some sexual harassment cases before he ran for President. The agreements said the women couldn’t disclose the terms of the settlements or comment about the cases. When the press dug up the story, he publicly accused the women of making false allegations. The women were gagged, but could they defend themselves?

When I settle cases, I always ask for mutual confidentiality. That would have solved the problem in this case. If the women were prohibited from speaking about the settlement or saying negative things about Mr. Cain, he should have also been prohibited from doing the same thing to them. I ask for mutual confidentiality for a more common (and possibly South Florida only) phenomenon: HR people getting cute in references and saying, “I need to look at the agreement to see what I’m allowed to say.”

When I’ve carefully negotiated neutral references, so the employer can’t say negative things in job references, that kind of statement violates the spirit of the agreement. It also probably violates the letter, because a neutral reference clause says the employer can only give out dates of employment and job title and no other information. Still, because I’m dealing with South Floridians, I like to drive the point home. As much as I enjoy dealing with some of my opposing counsel, I prefer to avoid unnecessary conversations about stupid things like this.

Let’s say you did sign a one-sided confidentiality agreement and the other side leaks like a sieve. You also agreed not to disparage them, but they didn’t do the same. Can you defend yourself? Here are a few things that might help:

Implied covenant of good faith: Every contract has an implied covenant of good faith and fair dealing. If you are gagged and suddenly find your reputation smeared, they may have violated the implied covenant of good faith and fair dealing.

Waiver: If they’ve blabbed to the press, you certainly can argue that they waive the right to confidentiality. Once it’s out, you can argue that you have the right to defend yourself.

Defamation: If they’re saying you are a liar, that you made it up, and you have proof it’s true, then you may have a case for slander or libel. Truth is a defense to a defamation case, so if you did make it up you’ll lose. If you were telling the truth, then your reputation is damaged and you might have a claim.

Herman Cain gave me one more good reason to ask for confidentiality and non-disparagement clauses to be made mutual. Management-side lawyers should want this too, so they don’t have to deal with the specter of seeing their client doing a press conference about a settlement they worked hard to keep secret. But they’ll say, “I can’t bind everyone in the corporation.”

True, they can’t bind the janitor. However, they can bind management-level people. Anyone who reads the agreement will also read that it’s confidential. And they can caution everyone involved that it’s confidential. So don’t buy the silly argument that they can’t bind everyone.

If both sides have to keep agreements confidential, it’s less likely that there will be Cain-sized problems down the road.